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Budget Process: Step-by-Step

Note: The House and Senate are in recess the week of February 16, 2009 for President's Day Recess.

Track 1- Economic Stimulus (Feb):

Feb. 13: House passed final version of HR 1, the stimulus bill, 246-183; Senate vote scheduled.

Feb. 16: President expected to sign the stimulus bill

Track 2 - Completion of '09 Appropriations (Feb):

House will consider an FY '09 omnibus appropriations bill following the President's Day Recess

March 6:Funding for much of the Federal Government expires under the terms of the current continuing resolution (see article below)

Track 3 - FY 2010 Budget:

President is normally required to transmit the
FY 2010 budget to Congress by the first Monday in February, however,
this being a presidential transition year, President Obama will likely
transmit a budget outline in late February or early March

On Monday of this week Treasury Secretary Geithner released the outline of a comprehensive financial stability plan.

The House on Jan. 21 passed a bill introduced by Financial
Services Chairman Barney Frank to require that a portion of the
remaining $350 billion tranche of the TARP (Troubled Assets Relief
Program) be used for foreclosure mitigation.

Stimulus Bill: House-Senate Conference Agreement

Today the House passed a $787 billion House-Senate compromise on the economic stimulus bill (HR 1), by a party-line vote of 246-183. (All Republicans and 7 Democrats voted against the final bill.)

The Senate is expected to pass the bill later this afternoon, clearing it for the President's signature.

According to estimates by the nonpartisan Congressional Budget Office (CBO), the bill's spending and tax provisions will cost $185 billion over the remainder of 2009, $399 billion in 2010, $134 billion in 2011, and $787 billion over fiscal years 2009-2019. Approximately 3/4 of the bill's spending and tax cuts will occur by the end of FY 2010 -- the target the Administration had been aiming for.

In a letter analyzing the likely economic effects of the stimulus bill, CBO estimated that "in the short run the stimulus legislation would raise GDP and increase employment by adding to aggregate demand and thereby boosting the utilization of labor and capital that would otherwise be unused because the economy is in recession. Most of the budgetary effects...would occur over the next few years, and as those effects diminished the short-run impact on the economy would fade....In contrast to its near-term macroeconomic effects, the legislation wold reduce output slightly in the long run....The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth as government bonds rather than in a form that can be used to finance private investment, the increased debt would tend to reduce the stock of productive private capital...the debt would 'crowd out' private investment."

Following are links to bill summaries, CBO and JCT estimates, bill text, and report language.

Treasury's Comprehensive Financial Stability Plan

Treasury would operate a Capital Assistance Program (CAP) to serve as "bridge funds" for relatively health banks until they can access private capital markets. Treasury's assets in the banks would be placed in a new Financial Stability Trust.

Treasury, in partnership with FDIC and the Fed, would create a Public-Private Investment Fund of $500 billion - $1 trillion to purchase troubled assets.

Treasury, in partnership with the Fed, would create a Consumer & Business Lending Initiative of up to $1 trillion to boost the secondary market for purchase of auto, small business, credit card, and other consumer and business loans.

In cooperation with FDIC, Treasury would establish a Housing Support and Foreclosure Prevention initiative for purchase of mortgage-backed securities (up to $600 billion), and a facility to reduce monthly mortgage payments ($50 billion).

In cooperation with SBA, Treasury would establish a Small Business and Community Bank Lending Initiative to boost the secondary market for SBA loans, as well as increase the federal guarantee of (and reduce fees associated with) such loans.